Big Lots (BIG) Extends Breakout After Raising Guidance

Big Lots, Inc. (BIG) shares rose more than 4% during Tuesday's session after the retailer announced third quarter guidance that was far higher than analyst estimates.

The company expects third quarter diluted earnings per share of between $0.50 and $0.70, which is sharply higher than the $0.21 consensus analyst estimate. These results are sharply higher than the $0.18 per share reported during the third quarter of 2019, which was before the COVID-19 pandemic took hold in the United States.

Last quarter, Big Lots reported a 31.2% increase in revenue to $1.64 billion, beating consensus estimates by $30 million, with non-GAAP earnings of $2.75 per share, beating consensus estimates by $0.05 per share. Comparable sales came in at 31.3% compared to consensus estimates calling for a 28.1% increase.

From a technical standpoint, Big Lots stock broke out from a descending triangle toward prior highs of around $57.50. The relative strength index (RSI) remains neutral with a reading of 58.59, but the moving average convergence divergence (MACD) could see a near-term bullish crossover. These indicators suggest that the stock has more room to run over the coming sessions.

Traders should watch for a further move higher toward prior highs of around $57.50 over the coming sessions. If the stock fails to break out, traders could see a move to retest the 50-day moving average at $46.32. A further breakdown could lead to a move toward prior lows of around $40.00, although that scenario appears less likely to occur.

The Bottom Line

Big Lots shares moved sharply higher after announcing third quarter guidance that came in sharply above consensus analyst estimates. With more room to run on a technical level, traders could see the stock retest highs of around $57.50 over the coming sessions.

The author holds no position in the stock(s) mentioned except through passively managed index funds.